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Makers of Medical Products
For Women Get Hearty Response

By

Stephanie N. Mehta Staff Reporter of The Wall Street Journal

Updated May 29, 1996 12:01 a.m. ET

Women's health is suddenly getting a lot of attention from Wall Street.

At least eight small companies that address women's medical needs have gone public in the past seven months, raising more than $200 million. The flurry of offerings isn't over; Imagyn Medical Inc., a Laguna Niguel, Calif., maker of devices for diagnosing and treating gynecological disorders, is going public this week.

"I think you are going to see ... a proliferation" of women's-health companies, says Andrew M. Thompson, president and chief executive officer of
FemRx Inc.,
a Sunnyvale, Calif., company that also makes devices for treating gynecological ailments. "There's a huge amount of space in this marketplace."

Women spend billions of dollars annually on specialized health care in areas such as obstetrics, gynecology and urology. Each year, more than two million operations on female reproductive organs take place, according to the National Center for Health Statistics. That doesn't include the six million childbirth-related procedures that are performed each year. (In contrast, doctors perform about one million male-only procedures, mainly prostatectomies, each year, the center says.)

While that market has always been large, public awareness of women's health has increased in recent years as women's groups have made areas of women's health such as breast cancer into political issues. And as women demand better treatments, their insurers are seeking treatments that result in shorter hospital stays and quicker recovery times.

In growing numbers, entrepreneurial companies are trying to tap that market by updating instruments like catheters and designing laparoscopes -- tubes that are inserted through tiny incisions that let doctors examine internal organs -- that are smaller and fitted to the female body. Others have updated products used in procedures like the Pap test, which is used to detect cervical cancer. Because the business of women's health care has seen relatively few new surgical products until now, many companies believe there is pent-up demand among doctors for innovative products.

Investors apparently agree.
Cytyc Corp.'s
stock is trading around $33 a share, up from $16 in March, when the Marlborough, Mass., company went public. Shares of FemRx, which opened at $9 a share in March, now are around $16.

"You can't pick up a newspaper without reading about some new development in women's health," says Kurt Kruger, a health-care stock analyst with Montgomery Securities in San Francisco. "As this area has moved into the public's spotlight, it also has moved into Wall Street's."

Despite the acclaim from Wall Street, however, most of the companies that have recently gone public are far from robust.
Conceptus Inc.,
which makes devices for treating reproductive disorders such as infertility, raised $44 million in a February public offering. It lost $5.9 million last year. "Our revenues are just beginning," says Kathryn Tunstall, president and chief executive officer of the San Carlos, Calif., company. "It's going to take a couple of years to get the revenue that will allow us to be profitable."

Small health-products companies lack the established, national sales forces of large manufacturers, who are also starting to get into the area of women's health. A subsidiary of
Johnson & Johnson
, for example, is marketing a microlaparoscope system in the U.S. that competes with Imagyn's. Analysts say that eventually these small companies will have to team up with giants -- or merge with one another -- to build sales.

And while companies insist that gynecologists are clamoring for better tools, some physicians are wary of the flood of new technology. "Every few months I discover a new laparoscope out there, but to my knowledge, no one's ever shown me a piece of equipment that's superior to the old one," says David A. Grimes, a professor and vice chairman of the department of obstetrics and gynecology at the University of California in San Francisco.

Women's health companies acknowledge that it will be a big challenge to overcome the skepticism of gynecologists, who are relatively unaccustomed to direct sales pitches. Industry executives hope to win physicians' business by using clinical data to show that their devices are more effective than the ones currently in use.

Meanwhile, there's no guarantee that insurers Medicare and Medicaid will pay for procedures with new devices. But women's-health entrepreneurs say their products result in less-invasive procedures with shorter hospital stays, a formula that is likely to appeal to cost-conscious insurers. Conceptus has developed a system that allows physicians to reach the uterus and fallopian tubes without surgery. If the product is fully approved for marketing in the U.S., the company says it will be able to offer a device that can either impregnate or sterilize a woman on an outpatient basis.

Faster recoveries also are likely to strike a chord with an increasingly active, working population of women, notes Charles A. Laverty, chairman and chief executive officer of
UroHealth Systems Inc.,
a Newport Beach, Calif., maker of products that treat urological disorders. "Women want to avoid hysterectomies" and other risky procedures, he says. "They're going to demand better solutions to gynecological problems."